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The Role of Educational Quality and Quantity in the Process of Economic Development

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  • Amparo Castelló-Climent
  • Ana Hidalgo-Cabrillana

Abstract

We develop a theory of human capital investment to study the channels through which students react to school quality when deciding on investments in secondary education and above, and to study how educational quality affects economic growth. In a dynamic general equilibrium closed economy, primary education is mandatory but there is an opportunity to continue on in education, which is a private choice. High-quality education increases the returns to schooling, and hence the incentives to accumulate human capital. This is caused by two main effects: higher quality makes higher education accessible to more people (extensive channel), and once individuals decide to participate in higher education, higher quality increases the volume of investment made per individual (intensive channel). Furthermore, educational quality plays a central role in explaining the composition of human capital and the long-run level of income. Cross-country data evidence shows that the proposed channels are quantitatively important and that the effect of the quality and quantity of education on growth depends on the stage of development.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1087.

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Date of creation: Nov 2011
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Handle: RePEc:cep:cepdps:dp1087

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: Quality of education; human capital composition; economic growth;

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Cited by:
  1. Laurent WAGNER & Rohen DE JUNET D'AIGLEPIERRE, 2010. "Aid and Universal Primary Education," Working Papers 201022, CERDI.
  2. Wei-Bin Zhang, 2013. "Education, Endogenous Human Capital, and Monetary Economic Growth with MIU Approach," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 7(2), pages 100-118, July.
  3. Wei-Bin Zhang, 2013. "Income and Wealth Distribution with Physical and Human Capital Accumulation: Extending the Uzawa-Lucas Model to a Heterogeneous Households Economy," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 50(2), pages 257-287, November.
  4. Gazi Mainul Hassan & Arusha Cooray, 2013. "Effects of Male and Female Education on Economic Growth: Some Evidence from Asia Using the Extreme Bounds Analysis," Working Papers in Economics 13/10, University of Waikato, Department of Economics.

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